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Retired chief investment officer and former NYSE firm partner with 50 plus years experience in field as analyst / economist, portfolio manager / trader, and CIO who has superb track record with multi $billion equities and fixed income portfolios. Advanced degrees, CFA. Having done much professional writing as a young guy, I now have a cryptic style. 40 years down on and around The Street confirms: CAVEAT EMPTOR IN SPADES !!!

Friday, December 16, 2016

USD -- Significant Overbought Developing

From mid - 2009 through 2014, US monthly export sales increased from $120 Bn. to $200 Bn.
Now, global economic growth has slowed since the initial phase of economic recovery, but a
much stronger USD since late 2014, when the Fed first tightened monetary policy, has no
doubt contributed in a major way to export sales weakness since then. Since the economic
recovery began in 2009, I have been bullish on the USD because longer term economic
fundamentals have gradually turned positive relative to the rest of the world. I have been
projecting a gradual climb in the value of the dollar from the low 70's to 100 by 2020. I am
not a fan of a very strong dollar because it encourages nasty mercantilist policies from Asia
and Germany. So, I am happy to see a USD overbought. $USD -- Weekly

The chart shows a developing, significant overbought condition for the dollar based on inter-
mediate readings of RSI, MACD, and the Keltner bands. USD price action is less sensitive to the
indicator readings in the shorter run, so one cannot say for sure that a downward hit on the
currency is imminent.

The bottom panel of the chart shows the gold price. It has been hammered recently by the sharp
increases in both the USD and the stock market. A retreat in the value of the dollar, even a
temporary pullback of 3-4%, could give the gold price a tradeworthy lift.

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